The Fannie Mae HomeReady Mortgage caters, to home buyers who may not fit the lending criteria. If you’re in a situation where you have a payment need to include income from someone not listed on the loan require a co-signer or plan to use rental income from a room in the purchased property then the HomeReady mortgage could be a suitable option for you.
Here are some common queries about how the HomeReady program operates and its eligibility requirements.
What is the minimum down payment?
When purchasing a one-unit property you must contribute 3 percent as a down payment. For a two-unit property, the minimum down payment is 15 percent while for three or four-unit properties it increases to 25 percent.
What sources are acceptable for down payment and closing costs?
Gift funds or available cash can be used for the payment when buying a one-unit property. Notably, none of these funds need to originate from your finances. The flexibility of using cash for payment is uncommon in lending standards and is considered one of this loan’s significant advantages.
What types of properties are eligible, for purchase?
You have the option to purchase a single-family home, condo, townhouse, or manufactured home. However, if you opt for a manufactured home you will need to make a payment of 5 percent. Additionally, you can consider buying a two to four-unit property as you reside in one of the units.
Am I required to reside in the purchased property?
Indeed HomeReady can only be utilized for acquiring an owner-occupied residence. It cannot be used for purchasing a home or an investment property.
Can I utilize HomeReady to purchase another property if I already own one?
No, it is not permissible to own any property, in the U.S. although owning another commercial property within the U.S. Is allowed.
What types of mortgage loans are offered?
There are options for obtaining fixed-rate mortgages spanning 10, 15, 20, or 30-year terms and adjustable-rate mortgages with terms of 5. And 10 years.
Are the interest rates higher compared to mortgages?
On the contrary, the rates offered are lower than those associated with Fannie Mae conforming loans that allow for such minimal down payments.
Will mortgage insurance be necessary?
Yes if your down payment is, then 20 percent mortgage insurance will be required.
The fees, for mortgage insurance will be a bit lower with this loan compared to low-down Fannie Mae loans and significantly lower than FHA loans. Once you’ve paid down your loan to 80 percent of the purchase price the mortgage insurance will no longer apply.
Whose income can be considered for qualification?
If your income alone isn’t sufficient to qualify you have the option to include co-borrowers who may or may not live in the property. Lenders will review income documentation such as paystubs and W2s from individuals not on the loan. Who confirm in writing that they will reside in the home with you for at a year. You should confirm with your lender whether this information is factored into your debt-to-income ratio calculation or if it is simply taken as a consideration (known as a “compensating factor”).
Can I use income from a room in my home for qualification purposes?
Absolutely. One key advantage of HomeReady is that it allows you to include income from a room in your residence when qualifying for a loan, which’s uncommon, in most cases.
What credit score do I need to qualify?
To be eligible, for down payment options, you’ll need to have credit scores. For instance, if your debt-to-income ratio is 36 percent or lower you should aim for a credit score of 680. However, if your finances are tighter and your ratio falls between 36.1 percent and 45 percent then a credit score of 700 is required to qualify for those payment options.
Is there an income limit I must meet to qualify for HomeReady?
There’s no income cap when purchasing a property in a low-income area. However, if you’re buying in an area where the minority population is, over 30 percent or it is designated as a disaster zone your income will be capped at 100 percent of the area median income. In areas, where your income limit will be set below the levels to prioritize those who most need assistance from the program. You can check the income limits based on state maps or ZIP codes.
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